Scrutinise agreement before signing it

Sudhakar Venkatesh, a non-resident Indian (NRI), had availed of a housing loan of Rs 40 lakh from ICICI Bank under the NRI loan scheme. The loan was sanctioned at a fixed interest rate of 8.5 per cent. It had to be repaid in 120 monthly instalments of Rs 49,595 each. Sudhakar executed a General Power of Attorney in his father’s favour to enable him to sign the loan agreement.

After the agreement was executed on March 22, 2006, the bank disbursed the entire loan. Sudhakar paid the EMIs regularly. After paying around Rs 59,65,000, he sent an e-mail to the bank on February 22, 2015, requesting for a loan statement, which he required to pre-lose the loan. When he received the statement, he was shocked to find several revisions in interest rate due to which the tenure for repayment had increased, requiring an additional payment of Rs 2,598,400.

Sudhakar felt aggrieved by the bank’s actions. He had a legal notice issued to ICICI Bank in which he demanded that a fixed rate of interest must be charged, as originally agreed. The bank replied that the loan was sanctioned on a floating-rate basis, but it had inadvertently mentioned fixed rate in its welcome letter sent after the loan’s disbursal. The bank apologised for the “mistake” made in its welcome letter, and insisted that the differential amount between the fixed-rate loan and the floating-rate loan be paid.

Sudhakar then filed a complaint before the Karnataka State Commission. The bank contested it and accused Sudhakar of trying to take advantage of a typographical error in the welcome letter even though the agreement mentioned that interest would be charged on floating rate. The bank argued that payment of  EMIs without any objection implied that Sudhakar was aware about the floating rate of interest being applied. The State Commission overruled the objections and ordered the bank to compute interest at a fixed rate of 8.5 per cent. It also awarded Rs 10,000 as damages.

The bank challenged the order in appeal, and argued that the terms of the agreement, which provided for a floating rate of interest, would prevail over the welcome letter, which contained an inadvertent typographical error.

The National Commission trashed the bank’s argument. It noted that the loan sanction letter mentioned the loan to be on a fixed-rate basis. The loan disbursement letter also mentioned an 8.5 per cent fixed rate of interest. The welcome letter also mentioned fixed interest. The only inconsistency was in the loan agreement. Sudhakar’s copy contained a blank space for interest rate, while the bank’s copy mentioned the interest rate to be 9.25 per cent floating rate. Sudhakar alleged that the bank had obtained his father’s signature without filling up the space for interest rate, and later the blank space was misused by the bank’s officials to manipulate the interest rate.

The National Commission concurred with Sudhakar’s argument and also observed that the bank had not sent any correspondence to his United States address even though the loan was under an NRI scheme.

Accordingly, by its order of February 16, 2022, delivered by Binoy Kumar for the bench headed by S.M. Kantikar, the National Commission indicted the bank for having obtained signatures on the loan agreement in which critical spaces had been left blank. It held this to be a deficiency in service. It ordered the bank to compute interest at a fixed rate of 8.5 per cent and refund the excess amount collected within two months. In case of delay, interest at the rate of 6 per cent would have to be paid.

The writer is a consumer activist